NEW ORLEANS – After an investigation by WWL-TV found several landlords had received Road Home Small Rental Repair loans and abandoned their properties, the state acknowledged Thursday that 16 percent of such lots statewide are not in compliance.
About 700 of the 4,400 properties that received forgivable, no-interest “incentive” loans in the state’s Road Home Small Rental program have failed to turn in documents certifying that they are charging required rents to tenants making certain lower incomes, said Doug Baker, spokesman for the state Division of Administration.
What’s more, WWL-TV found some of those landlords have not even rebuilt or repaired their properties. The station looked at the Algiers Point neighborhood, a small, historic area that didn’t suffer major flooding in Hurricane Katrina, and found that four of the 14 Road Home Small Rental properties there had not rebuilt.
The state set up the Road Home Small Rental Program to give mom-and-pop landlords loans – loans that would be forgiven and turn into grants as long as they fixed the properties and charged lower rents to families with lower incomes for 10 years.
It was touted in January 2007 as a more efficient version of the Road Home’s homeowner grant program, a $10 billion effort that started poorly in 2006. The rental version started as an $864 million program to get working class families back into the city quickly. But it didn’t actually pay out loans until construction work was complete and landlords dropped out in droves.
The state began cannibalizing the program to finance other efforts, such $75 million as a soft-second mortgage program for first-time homebuyers. Later, WWL-TV investigations discovered major false billing by contractors hired to oversee the program.
One former contract employee exposed by the station, Praveen Kailas, (pictured below) was convicted of stealing $236,000 in federal funds from the program and began a three-year prison term this week in Fort Worth, Texas. Another, former state Rep. Girod Jackson, D-Marrero, is awaiting sentencing on a federal tax fraud conviction.
By the end, the program was left with about $500 million.
State makes changes, but problems persist
The state made some adjustments to improve the program, including implementing an advance payment option to give landlords half the loan amount upfront. That sped up the work, but it also left the state in a weak position when landlords did not follow through.
For instance, Charles Walker was awarded a $158,000 forgivable loan in 2010. Nearly four years later, the house (pictured below) is riddled with broken windows, a leaking roof and flapping Tyvek paper.
Walker says he's been blocked by stop-work orders from the Historic District Landmarks Commission.
But HDLC records show he didn’t do anything until he was cited for neglect, then failed to use proper materials for window repairs.
In 2011, the city fined him for blight and he hasn't paid his taxes since 2010. City records show his delinquent tax bill is over $20,000.
That's frustrating for Frank Standige, who bought the fire-damaged house next door 16 months ago, fixed it up and is trying to sell it in spite of the eyesore Walker left.
“Next door, as you can see, is a mess,” Standige said. “It's been like that since we bought the house and we haven't seen the owner since.”
Other properties got the Road Home loans but never even started construction. Troy Fields got half of his $138,000 Road Home loan in 2010 and tore down the house, public records show. But it’s still a vacant lot.
We reached fields on his cell phone, but he declined to comment.
Another vacant lot is owned by Keisha Millon, who was awarded a $47,000 Road Home loan. She now owes the city more than $22,000 in back taxes.
Looking for answers
Skip Gallagher, president of the Algiers Point Association, says he’s been leaning on the state to do something about these parcels.
“The city, to be fair, has tried to do something about it,” Gallagher said. “But the state is the one monitoring this program.
Gallagher is exasperated. Every loan came with specific requirements to fix the property, rent it to tenants making certain incomes and report on progress annually. But when Gallagher calls the state about the abandoned properties, he says they give him the brush-off.
“More than a few times, they've told me these properties are in compliance,” Gallagher said. “And then I've asked them things like, have they provided the records for rental income and work that's been done? Because they're supposed to, from the contract, yearly provide that information to the state. And they've said, 'No.' I said, ‘And yet, they're in compliance?’”
Baker, the state spokesman, said Thursday that those properties are clearly not in compliance. In fact, he said the state sent the offending landlords letters in July and October demanding that they comply within 90 days.
“At the first of this year, these properties were transferred to the Executive Compliance Committee – a panel that reviews non-compliant files to determine the best way to recapture the funds that were originally granted to the owner,” Baker said.
But recovering the advance loan payments could be difficult because of the way the loan documents and accompanying “Incentive Payment Agreements” were written. Legal analyst Foret says their enforcement mechanisms are simply too weak.
“There is nothing else securing the loan other than that piece of property,” Foret said. “So the state has to go in, seize that piece of property, and the owner, who might have had the best intentions in the world, does not have to repay the loan personally.”
The struggles with the incentive loan payments led the state to create an “initiative option” where the state selects a construction contractor and pays the money to that company as work is completed. But only 342 properties are in that program, accounting for $53 million of the $421 million awarded to landlords so far.